Title

Authors

Date of this Version

November 2004

Comments

Published in Cornhusker Economics, 11/10/2004. Produced by the Cooperative Extension, Institute of Agriculture and Natural Resources, Department of Agricultural Economics, University of Nebraska–Lincoln.http://www.agecon.unl.edu/Cornhuskereconomics.html

Abstract

Past issues of this newsletter have addressed the assessment of crop insurance needs (March 11 and November 11, 1998). The approach suggested was to identify the cash flow commitments for the year and then to prioritize those commitments. The latter step was suggested recognizing that: 1) insurance coverage may not be available to cover all commitments, 2) even if sufficient coverage is available, premiums increase substantially as coverage is increased, and 3) the more insurance purchased the more risk transferred to the insurance company and the less profit potential retained by the farm operation. In a more recent issue the trade-off between risk and return was illustrated by comparing levels of crop revenue coverage and forward pricing (February 12, 2003). It was suggested the level of crop revenue coverage be characterized by the associated per acre revenue guarantee, which in turn can be compared to the per acre cash commitments.